from the would-be-useful dept

We've argued for years that broadband data caps are not -- as the industry would have you believe -- about stopping "data hogs" or making sure that people "pay their fair share," but rather about protecting provider revenue (or, really, secretly increasing fees without "increasing" fees). A recent study from the New America Foundation has now made it clear that broadband data caps are not at all about dealing with data hogs, but almost entirely about increasing revenue for the providers.

As this paper documents, data caps, especially on wireline networks, are hardly a necessity. Rather, they are motivated by a desire to further increase revenues from existing subscribers and protect legacy services such as cable television from competing Internet services. Although traffic on U.S. broadband networks is increasing at a steady rate, the costs to provide broadband service are also declining, including the cost of Internet connectivity or IP transit as well as equipment and other operational costs. The result is that broadband is an incredibly profitable business, particularly for cable ISPs. Tiered pricing and data caps have also become a cash cow for the two largest mobile providers, Verizon and AT&T, who already were making impressive margins on their mobile data service before abandoning unlimited plans.

The paper goes on to debunk the usual arguments in favor of broadband caps. Beyond noting that the cost to providing broadband by the big guys has gone down significantly (while cost to consumers has stayed steady or gone up), they also point out that the "congestion" argument doesn't make sense. They note that even if there was congestion, a data cap would not be the best way to deal with it.

An analogy to rush hour traffic is useful here. Rush hour delays are generally caused by a spike in simultaneous demand for road access. Local governments often respond to this traffic congestion by instituting carpool lanes during certain hours, or introducing variable peak pricing for tolls, where prices are higher during the traditional workday commute than at other times. Both of these examples are methods to reduce demand during the time it is highest. It would make little sense to try and limit the total miles residents drive in a month as a means to solve rush hour congestion. Such monthly mile limits would needlessly impact residents who drive when the road is empty late at night and do not contribute to traffic congestion. Yet this is logic being employed when instituting monthly data caps.Monthly data caps are a tool that decreases consumption at all hours of the day.

In fact, the report even points out that Comcast has quietly admitted to the FCC that it's caps have nothing to do with network congestion... even as it has argued in favor of them publicly by using the "congestion" argument. As we've pointed out over and over again, if you talk to the tech people at broadband companies, they admit that the best way to deal with congestion is to simply upgrade capacity, not try to choke off usage. And this report shows that, rather than do that, telcos have been going in the other direction:

The best way to resolve chronic network congestion in the long term is to invest and expand capacity. Yet, a review of the publicly available financial document for some of the largest ISPs in the country shows a decline in capital expenditures—the costs associated with building, upgrading and maintaining a network, such as construction, repairs, and equipment purchases—for their wireline networks.Many ISPs are spending less money on capital expenditures now, both as a ratio to revenue but also even in raw dollars,than they have in years past.

Given all that, it's great to see that Senator Ron Wyden is introducing a new bill to protect consumers against data cap abuse. One of the many issues we've raised with data caps is that users have no idea how much broadband traffic they use, and related to that, broadband providers are notorious for either not providing meters for usage, or providing ones that just don't work very well (or give you some sort of arbitrary number when you check). The new bill, the Data Cap Integrity Act, would do two key things:

Require tools be available for users to really measure and manage their broadband usage

Have the FCC establish standards for ISPs to make sure that they only use data caps to manage network congestion, rather than as a way to "monetize data in ways that undermine innovation."

The bill literally has a section entitled: "SMART DATA CAPS INSTEAD OF DUMB ONES" which reads:

SMART DATA CAPS INSTEAD OF DUMB ONES.—The Commission shall evaluate
a data cap proposed by an Internet service provider to determine whether the data
cap functions to reasonably limit network congestion in a manner that does not
unnecessarily discourage use of the Internet.

If we had a real competitive market for broadband, of course, this wouldn't matter. I'm still hesitant to support legislation telling companies how they can implement a business model. But, as we've been arguing for many, many years, there isn't real competition in the broadband space for most users, which is what allows broadband providers to get away with crap like using data caps to limit internet usage and increase revenue. Furthermore, given how much the industry has relied on government subsidies and rights of way, it seems only reasonable to think that some level of requirement to actually, you know, not screw over users, might be appropriate.

That said, the bill also has the following tidbit, which almost certainly dooms it from the start:

DISCRIMINATION OF CONTENT.—A covered Internet service provider may not, for purposes of measuring
data usage or otherwise, provide preferential treatment of data that is based on the source or the content of the data.

That's going to be interpreted as a backdoor attempt to put in place a net neutrality rule, which is more or less guaranteed to freak out the wing of Congress who insists that net neutrality is an attempt to take over the internet.

Google just needs to kick their fiber into high gear. Perhaps a kickstarter-style system where town residents pledge X ammount of dollars towards their city, and when they raise enough money to install a fiber system there, do so.

I'd rather see Senator Wyden propose a bill which allows a free market of broadband competition and remove these goddamn monopolies.

In addition, I'd like to see legislation that prohibits cable companies from "leasing" out their boxes, which consumers can buy within a year. I alone have purchased over 12 of these boxes thanks to the extortion pricing of "HD" boxes, which cost more than their older analog boxes.

Furthermore, we really need government to investigate why consumers, who utilize three services through their cable company, are paying three times for digital data being transmitted over a single line.

I'm glad to see this bill being brought forward. But I fear it is DOA. At the very least, I hope it shines a light on this subject, however brief.

The broadband lobby is way too powerful and congress and the FCC could care less about protecting consumers from being gouged by ISPs. There's little to no real competition and these providers know it and are able to get away with their current anti-consumer practices because congress and the FCC are asleep at the wheel.

Common Sense

How is net neutrality an attempt to "take over the Internet"? If something, it's an attempt to prevent greedy broadband providers from controlling Internet.

By what logic someone should pay one price for accessing Internet through a mobile device, but higher price while accessing it with another device connected to that mobile device which in its turn connects to the provider? The only logic is greed. So they put all kind of traffic sniffers which detect such case and block it, unless you pay extra money for "tethering service" (luckily that's bypassable but not without a hassle). All this kind of junk should be prohibited on the legal level.

Re:

That's called a levy system. Levies don't always pass on votes. Given the current economy, I don't think the average American taxpayer would like to flip the bill for Google, or anyone else, to currently set up more lines.

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Some cities had successfully set up fiber systems and started municipal broadband ISPs. The only thing standing between the US and modern internet access is the telcos, who band together to crush anything that opposes their monopolies. (Such as those municipal broadband ISPs, who were successfully charged with felony interference with a business model and shut down.)

Google has the clout to shrug off arbitrary lawsuits, and a clear interest in promoting cheap, fast internet access. I would dearly love to see many cities partner with Google to provide cheap/free broadband to their citizens. I don't even like Google; I just want the other ISPs to actually compete instead of just sitting on their monopolies and musing out loud about how they can further inflate their prices.

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Not a bad idea :)

If a foundation or something similar holds the ownership of the fiber after it is build and Google only gets a 5 or 10 years loose exclusivity in it and the money is entrusted to someone who can actually hold it for as long as it need to reach some threshold.

Not well thought out

There is no need for a data cap bill. There is a need to break up Comcast, ATT, Verizon, and TimeWarner Cable.

Way back when ATT was broken up, there was a ton of competition between the resulting RBOCs and CLECs. If Congress wants to be useful they should prohibit broadband providers from monopolizing a region, or limit their size, or anything else that promotes actual competition. The FCC needs to take a new look at its regulations and understand that MSOs (cable companies) and RBOCs (telcos) are actually the same now.

If you think data caps are bad, Comcast charges long distance rates on VoIP service. WTF??? Even the Telcos know that LD died.

Not well thought out

There is no need for a data cap bill. There is a need to break up Comcast, ATT, Verizon, and TimeWarner Cable.

Way back when ATT was broken up, there was a ton of competition between the resulting RBOCs and CLECs. If Congress wants to be useful they should prohibit broadband providers from monopolizing a region, or limit their size, or anything else that promotes actual competition. The FCC needs to take a new look at its regulations and understand that MSOs (cable companies) and RBOCs (telcos) are actually the same now.

If you think data caps are bad, Comcast charges long distance rates on VoIP service. WTF??? Even the Telcos know that LD died.

Re: Not well thought out

I'd say big companies should pay big taxes. Once a company grows beyond a determined level of revenue or whatever is the best metric it should be penalized. And it should be measured considering ALL companies on the same market under the same owner to avoid fake competition.

We need to start thinking how to prevent companies from becoming too big and if they do get too big allow competitive advantage for smaller players.

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There is esentially a "free market" on broadband already. That the companies are very cutthroat and the initial investment / knowledge required is unproportional has little to do with "free market". If anything market-related it would take subsidies to smoothen the market and that is anything but "free market".

Re: Re: Not well thought out

We are to a large extend talking international corporations here. If there is a high tax in a country they choose to buy services from their own company in Cayman Islands for obscene amounts and thus have to pay Cayman Island tax on the money.

By increasing taxes domestically on these corporations they are almost forced to do that little trick. When it comes to big corporations I think that forced breakup is the only way to protect against abuses from their side. The power of those companies is scary and cannot be dealt with without international agreements and that is never happening!

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But it does leave an interesting point: that this can be used to gauge interest and can then be used as part of a contract: you pay X dollars a month for the access, and we'll pay for the infrastructure.

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Thanks to Reagan, corporations became people. He corrupted the US democracy by allowing crazy bankruptcy laws, decreasing tax revenue, destroying free markets in music and media, and essentially corrupting our capitalist system by turning it into a plutocracy.

Kind of sad, but the American people witnessed a heist in the 1980s that would not have happened except for the policies of Reagan (with an assist from Nixon in regards to the drug war)

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"I'm still hesitant to support legislation telling companies how they can implement a business model."

unfortunately, I'm all for supporting legislation here. If anything, I feel the proposed bill is far too weak. Consumers are being abused by monopolies/duopolies. The market can't correct, and legislation is the only option until the market has actual competition.

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That's called a levy system. Levies don't always pass on votes.

This would be different because with a levy, if the vote passes everyone must pay a certain percentage (of property tax, or sales tax, or whatever). With a pledge system, everyone pledges whatever they want, including nothing.

I love the idea of smart data caps. The idea of a data cap based on the number of bytes transferred doesn't make any sense. How much you transfer doesn't matter nearly as much as when you do it.

The problem ISPs have is network congestion and if you look at usage patterns, there are only a couple times during the day where congestion is a problem. I think those are the only times where usage should be monitored. Who cares if you are watching Netflix at 2 am over your cellular connection? Nobody else is using the network at that time anyway.

ISPs could sell it the same way they already sell voice services - unlimited nights and weekends.

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I'd rather see Senator Wyden propose a bill which allows a free market of broadband competition and remove these goddamn monopolies.

I agree, but the only way I see this working is for a non-government, non-profit organization to take over the infrastructure and then charge (based on costs of infrastructure/maintenance,) a fee for all competitors to use the infrastructure. The problem with this is that the organization will not likely provide the upgrades to the network, and those who used taxpayer money to build the infrastructure in the first place will likely rebel at the NGO coming in and taking over "their" infrastructure.

We have to treat the network as an infrastructure item, like water pipes and power lines, and I doubt there will be much traction for that.

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T-Mobile also has data caps, though their plans are the best for their price.

T-Mobile and Sprint do not have data caps in the same way that Verizon and AT&T do. If you go over your allotted cap on T-Mobile or Sprint, they drop your speed, but you are still able to use the internet. I ran a hacker conference wireless off of T-Mobile, and went significantly over the cap that month, and they never cut me off or charged me more for that month.

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There is? Could have fooled me! In my neck of the woods, there's no such thing. If you wanted to start a new broadband ISP, you'd have to string your own wires to everyone's house, which you can't do because the cities have have granted exclusive territorial rights to the existing companies to do this.

Go, Wyden. He's basically the only member of Congress who has a clue what the Internet is about and what needs doing to keep it free and functional -- well at least as much as it is now. The giant mistake was turning this vital tech over to "free enterprise", ie irresponsible monopolies, in the first place. Surprise, surprise, the chickens keep coming home to roost.

What this bill really needs....

What this bill really needs is a requirement that cable and telephone operators that include "on demand" content, or any streamed video, to cable boxes be required to count that data against their own customer's data caps. Data caps are what forced me to re-instate my cable, and stop using netflix so often. If their complaint is "congestion" then all this data should be counted as well, as it contributes to the congestion.

The bill is far too weak. Make it a federal law that says no data caps, no filtering, no throttling whatsoever at any time, for any reason, period. If they do they pay MASSIVE fines that will sting them. Anything less, and the greedy telcos will find slimy ways around it.

Of course, nobody has the balls to introduce something like that and there's no way in HELL it'd ever get passed.

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Yes, they don't cut off, but throttle the traffic over the limit. However it's still a cap, though a softer one. In essence it's as pointless as the others.

Certainly don't disagree with you. It is pointless, but it isn't the same as with AT&T where you get a surprise bill for $342.98 in the mail because you used more than your 4GB limit and they charged you $0.125/MB beyond your cap.

Comcast Monopoly

Senator Ron Wyden sounds like the only person in the 'entire' congress, who I'd actually be happy to vote for. I'm paying $45 a month for just internet service (no TV, no phone) with Comcast. It's the cheapest/slowest internet package they offer. Comcast is the 'only' ISP provider in my area. Plus, I just got a letter in the mail last month stating that Comcast is once again raising the prices on everything in my area. They raised prices last year too.

it's almost like google's been given a free pass for the past 5-10 years because no one's considered applying anti-trust to a service perspective. they'd best tread lightly, especially when it comes to investment into tangible assets.

even if they were broken up, likely they'd create more value and jobs, likely additional companies.

i realize that may be an unpopular concept, likely something people wouldnt want to hear, but i believe it's true. people work harder when they can directly create value.

South African Telcoms

Here in South Africa the Telcoms have had different allowances at different times of the day for years.

In malls at the moment there seems to be a bit of a war between the big four in the size of what they will allow you to download from midnight to 6am, so it is easy to do your normal browsing during the day and then schedule large downloads for later.

It works here and would work in the US - if there was proper competition.

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If someone wants to skirt your taxes, then place a tax on revenue generated in your country, then let the company submit sales+ expenditure info and write off taxes paid in other countries.

If the company does not pay taxes in other countries, then they're still on the line to pay taxes in your country.

So say they would normally pay $50mil in taxes in your country, but they moved HQ to another country where they pay only 1/2 that tax rate. Then let them deduct the $25mil they paid in taxes in the other country, but they still owe $25mil in your country.

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Hmm... So why is it that there are only two allowed service providers in my city? comcast and Century link. The only reason there are two is that CenturyLink (qwest) got a monopoly on telephone lines, and comcast on cable TV. Then each used that infrastructure to provide internet.

What I feel should happen is that the actual wires be owned by a heavily regulated not-for-profit (somewhat like the power and water companies), and then the ISPs can use that wire/line/fiber/etc to provide me with internet. Yes this would mean that I would likely have 2 bills, one for the line, and one for the ISP.

I'm not quite sure how to incentive-ise the line owner, but it's a work in progress.

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technically they're already a natural monopoly in various internet services

A natural monopoly is a situation where it doesn't make sense for multiple companies to compete. Water supply, for example. Installing water pipes and supplying water is a natural monopoly; running a search engine is not.

it's almost like google's been given a free pass for the past 5-10 years because no one's considered applying anti-trust to a service perspective.

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Yes this would mean that I would likely have 2 bills, one for the line, and one for the ISP.

The ISP could pay the line owner and bill you, no need for for two bills. The local public utilities commission would regulate the rate the owner charged to ISPs, and then lots of ISPs would compete for your business. It's a nice dream...

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Google has started the conversation but i think they need to hit a big city before anything is really done, the problem is that competition is improving in the areas Google goes to but other cities are sitting with the same problem, lack of investment in the infrastructure.

Maybe the Government should be using taxpayers money to implement a fiber to the home service, that they control the infrastructure and just lease the right to use the network to the likes of Comcast or even Google.

Let the governemetn provide the infrastructure like they did for the phone services and electricity services and water services and road infrastructure and then lease it to the ISP's to use. A number of things would happen with a system like this, fiber would be going to everywhere there is a phone, i.e to every premises be they residential or business.Also it would encourage more competition and more stability in the whole network.

They did very well with creating the other infrastructure that exists now it was only when it was sold off that businesses suddenly stopped improving the networks be they water or electricity.